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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Meridian Pharma Ltd carries its investment in a subsidiary, Sahyadri Labs Ltd, at cost in its separate financial statements. At the reporting date the board commits to a plan to sell the whole investment and the criteria to classify it as held for sale are met. How should the investment be accounted for in the SFS?

The investment carried at cost must be accounted for under Ind AS 105 once it is classified as held for sale, or part of a held-for-sale disposal group. It is therefore measured under that standard instead of simply remaining at cost.

  1. AContinue at cost with no change in classification
  2. BIn accordance with Ind AS 105 as held for saleCorrect
  3. CSwitch to the equity method until sold
  4. DRemeasure to fair value through OCI under Ind AS 109

Explanation

Investments accounted for at cost are accounted for in accordance with Ind AS 105 when classified as held for sale. Hence they are measured at the lower of carrying amount and fair value less costs to sell. Option A ignores this requirement.

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